Digital consumer spending will more than double to $100 billion by 2020, and the number of women, older age groups & smaller town users buying online will increase consequentially, says a joint report by Google and the Boston Consulting Group (BCG).
The report titled - Digital Consumer Spending in India: A $100 bn Opportunity - says as the number of online transactions increases over the next few years, the profile of the transactors will undergo a dramatic change as well.
“They (online consumers) will no longer be the typical male, millennial, metro-residing users of today ... The number of women shoppers will grow more than 2.5 times, while shoppers aged 35 and above will triple. Online shopping will also take off in India’s non tier-1 cities as consumers there mature while infrastructure improves,” the report says.
Smaller cities will comprise more than 50% of the online shopper base by 2020, according to the report
Online spending in India is still impaired by slow Internet, low smartphone and Internet penetration, and a degree of discomfort with online transactions. These, however are likely to change in the next few years as users mature and digital infrastructure and availability improve. In January 2018, Speedtest Global Index put India on the 112th spot on it’s mobile Internet speed ranking, with a download speed on 9.14 mbps. Norway was number one on the list with a mobile download speed of 62.75 mbps.
Purely by numbers, India has a large number of smartphone users, but they barely make about one-fourth of the total population. The adoption of online transactions is still lower than China and the US. The report mentions that only 1 in 5 internet users in India buy products online compared to 4 in 5 for US and 3 in 5 for China. Also, it is only about 21% of internet users that use online banking in India compared to almost 70% in US and 50% in China.
The report also highlights that about 75-80% internet users do not spend online currently and only 20 percent of the online shoppers spend 65-65 % of their total spend online.
The findings of the Google and BCG report are relevant as they underline the vast opportunity that exists for e-tailers, start-ups and budding entrepreneurs for expanding their base among customers in newer cities and with varied demographic profiles.
Although, barriers to purchase still exist among the users, the report finds, like lack of touch and feel, concern with the fitting for buying clothes to difficulty in return, easier service offline for buying mobile online. Similarly, barriers exist for availing services online as well.
“The ecosystem needs to focus on creating a very targeted value proposition for different segment of users and across different categories to drive larger adoption. For example, in Food &Grocery category, convenience becomes a key trigger for frequent shoppers while discounts are important for occasional shoppers and quality is a key barrier among offline shoppers,” says Nitin Bawankule, industry director, Google India.
A sizeable population, growing affluence, rise in disposable incomes and urbanisation make India a massive consumer market, but as spending patterns and consumer profiles change, the onus is on companies to adapt themselves to newer customers and address their different and specifics needs.
This shift in the online shopper profile will require e-tailers to rethink their offering across assortment, pricing, delivery options and return policies, says the report.